Recession ‘absolutely’ will happen if Trump’s tariffs remain, top financial expert says

‘We will have bankruptcies of retailers of very significant magnitudes if this is allowed to continue,’ Torsten Slok says

A recession will “absolutely” come this year if tariffs remain at their current levels, according to a top financial expert.

The chief economist at Apollo Global Management, Torsten Slok, appeared on CNBC Monday, saying that, “It’s all conditioned on tariffs staying in place at these levels, and if they stay at these levels, we will absolutely have a recession in 2025.”

If the tariffs enacted earlier this month remain, there’s a 90 percent chance of a two-quarter contraction in economic output, and gross domestic product is set to drop four percentage points, according to Slok.

On April 9, President Donald Trump put in place a 90-day pause on most tariffs, even as he raised the tariffs on China to 145 percent. His announcement of tariffs and later pause has caused volatility in the stock markets, causing massive gains and losses depending on the day.

Shipping containers sit stacked on trains at the Port of Los Angeles. An expert says if Donald Trump’s tariff plan continues, the U.S. will ‘absolutely’ enter a recession (AFP via Getty Images)

The tariffs on China, which are central in the recession prediction, are particularly damaging to small businesses, Slok argued, as they’re less likely to have the cash on hand needed to pay the higher levies.

“Large businesses can pay the extra cost, because when goods come from China to Los Angeles, then of course, you have to pay now a higher tariff,” said Slok. “Large companies have the resources and the working capital to deal with that, but small businesses do not have the working capital.”

“Think about your independent toy seller in Nebraska, your men's clothing wear in Wyoming. Think about your Colorado seller of ski gear. “They basically do not have money and cash to pay 145 percent extra,” he added. “So, we will have bankruptcies of retailers of very significant magnitudes if this is allowed to continue.”

A downturn in the retail market would damage the labor market and consumer sentiment, as small businesses with fewer than 500 employees account for 80 percent of the labor force.

President Donald Trump holds up a chart of 'reciprocal tariffs' while speaking during a 'Make America Wealthy Again' event in the White House Rose Garden. The tariffs on China, which are central in the recession prediction, are particularly damaging to small businesses, an expert has said (AFP/Getty)

Slok joined Apollo after stints at Deutsche Bank, Bank of America, the International Monetary Fund and the Organization for Economic Cooperation and Development.

Weekly jobless claims are of particular interest as they’re where job market weaknesses will first appear.

“The impact of tariffs, especially on China, is still weighing heavily, in particular, on small businesses,” said Slok. “And we have not seen that in jobless claims yet, but we should expect to see that.”

Recession concerns have increased on Wall Street this month, even as the back-and-forth style of Trump’s tariff policies has made it difficult for analysts to forecast the full impact.

After the April 2 Trump “Liberation Day” announcement of widespread tariffs, David Kelly of JPMorgan Asset Management said there was a 60 percent chance of a recession if the tariffs remain in place.